The heads of key financial regulators including the Office of the Comptroller of the Currency (OCC) and the Federal Reserve gave their opening remarks to the Senate Banking Committee on Wednesday and revealed their thoughts on the relaxation of several major banking regulations.

The regulators' proposals included reducing the frequency of stress testing and wind-down plan submissions for banks; devolving more bank oversight to the OCC to centralize banking regulation; partially repealing the Volcker Rule, which restricts banks from making speculative market bets with their own capital; and reviewing each regulator's framework to remove any overlapping rules. In aggregate, these proposals aim to reduce banks' regulatory compliance burdens, which grew significantly post-2008.

If implemented, there are two potential ways these revisions could impact US fintechs:

Fintechs could face a lower regulatory hurdle. Acting OCC head Keith Noreika suggested the OCC should be made wholly responsible for supervising small banks (at the moment, it shares this mandate with the Fed); that new banks awarded an OCC charter shouldn't need separate approval from the FDIC to get their deposits insured; and that the CFPB's oversight of "certain" lenders — which could possibly include alt lenders — should also revert to the OCC. If it were made easier for banks to become regulated and licensed, this could benefit fintechs looking to offer banking services — for example, neobanks and alt lenders. At the moment, the convoluted US regulatory landscape means getting licensed is extremely resource-draining for smaller players.

Fintechs might see more competition from big banks. Fed governor Jerome Powell's suggestion to reduce wind-down submission obligations and make stress testing less frequent would significantly reduce the resources big banks expend on compliance and reporting, which currently constitute some of their largest expenditures. Moreover, relaxing the Volcker Rule could boost incumbents' liquidity. All of this would give large incumbents back much of the power they lost after 2008, and free up their resources to invest in innovation. This could mean crippling competition for many smaller fintechs, many of which flourished in the vacuum created by big banks' curtailment.

Some look far likelier to benefit from this deregulation push than others. Even though Powell and Noreika are both temporary appointments, by this point, it's almost guaranteed that deregulation momentum will outlast them. And no matter what form the deregulation takes, some players seem far likelier to profit than others. For a start, consumers will most probably be the first to suffer if banks are given back the power to put their own interests first. Second, the changes discussed on Wednesday would probably only give a boost to fintechs seeking to become banks. This would likely see more neobanks emerge in the US market — but the benefits look less certain for fintechs operating in other segments of the financial services industry.

Outlines the initiatives currently in play from major regulatory agencies.

Considers the future of U.S. fintech regulation and its potential impact on the fintech sector.

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